BlackRock is closely tracking Wednesday’s CPI release as an early signal of how escalating U.S.–Iran tensions may be contributing to already elevated inflation in the U.S. economy.
The firm is also focused on May’s inflation report for clearer insight into how the ongoing geopolitical conflict is feeding into persistent price pressures.
In its weekly market note, BlackRock Investment Institute said, “We look to May U.S. inflation figures for a clearer read on how the Mideast conflict energy shock is impacting already sticky inflation. The full breadth of the shock has yet to show and will depend on how it evolves.”
The May Consumer Price Index is set for release on Wednesday at 08:30 am ET. Economists polled by Reuters expect inflation to rise 4.2% year over year, the highest reading since April 2023 and up from 3.8% in April.
If that forecast is accurate, it would reinforce concerns that inflation remains well above the Federal Reserve’s 2% target, increasing the likelihood that policymakers may lean toward additional rate hikes rather than the rate cuts markets previously expected.
Higher interest rates generally reduce demand for risk assets, including cryptocurrencies. A hotter-than-expected CPI reading could therefore add further pressure on crypto markets, particularly after Bitcoin already fell nearly 14% last week and dropped below $60,000.
BlackRock also highlighted a key downside scenario involving a prolonged closure of the Strait of Hormuz extending into July. Such a disruption could intensify the energy-driven inflation shock, especially if U.S. oil inventories fall toward their lowest levels in four decades.
The firm noted, “We think a prolonged closure of the Strait of Hormuz into July could bring the impact of the shock to the fore more prominently, especially as U.S. oil inventories potentially hit four-decade lows.”
